Oil prices jumped on Monday after U.S. President Donald Trump imposed tariffs on Canada, Mexico and China, raising fears of crude supply disruption from the two biggest suppliers to the U.S., but the prospect of lower fuel demand capped gains, Reuters reported.
Oil prices have fallen for the second consecutive week, but a major bullish catalyst may be looming in early February. Oil prices are set to finish last week some $2 per barrel lower than a week ago as the January ICE Brent futures contract expires just below $77 per barrel, OilPrice said.
Oil and gas prices jumped on Monday after Trump imposed tariffs over the weekend. The tariffs, which will take effect on Feb. 4, include a 25% levy on most goods from Mexico and Canada, with a 10% tariff on energy imports from Canada, and a 10% tariff on Chinese imports. US marker West Texas Intermediate jumped as much as 3.7% before paring about half of those gains to trade near $74 a barrel. Global benchmark Brent was above $76.
According to the latest data from the U.S. Energy Information Administration, the U.S. imports of Canadian crude oil reached a record 4.3 million barrels per day in July 2024, following the expansion of Canada’s Trans Mountain pipeline. It also imports 450,000-500,000 bpd of Mexican oil. America’s imports Canada made up about 62% of all crude oil imports in the first 10 months of last year, while Mexico accounted for about 7% in the same period. 70% of Canadian oil is processed by refiners in the Midwest.
US to tax oil imports from Canada at 10%. Mexican energy imports to US to be charged 25%. Canada, Mexico account for 1/4 of crude processed by US refineries, Reuters reported.
According to the Goldman Sachs’s note, seaborne oil imports from Canada and Mexico will be rerouted to other markets, with the U.S. replacing those supplies with crude from OPEC, Latin America, and refined products from Europe. The new tariffs imposed by U.S. President Donald Trump on imports from Canada, Mexico, and China are likely to have a limited near-term impact on global oil and gas prices, Goldman Sachs said.
Canadian oil producers are expected to eventually bear most of the burden of the tariff with a $3 to $4 a barrel wider-than-normal discount on Canadian crude given limited alternative export markets, with U.S. consumers of refined products bearing the remaining $2 to $3 a barrel burden. Potential tariff-driven decline in U.S. natural gas imports from Canada is too small to significantly raise U.S. natural gas prices.
The investment bank kept its 2025/2026 oil price forecasts unchanged, expecting minimal near-term price impact due to stable global oil production and demand, as well as the Canadian oil tariff already being priced in. Last week, Goldman Sachs raised Brent oil price forecast for this year and 2026 to $78 (versus $76 previously) and $73 (from $71), respectively.
While crude markets will see higher prices and consumers will be forking out more for gasoline and diesel costs in the near term, the spike is only temporary, CNBC reported. Additionally, global oil prices could drop further after the next quarter as tariffs worsen the demand picture and OPEC+ faces increasing pressure from Trump to reverse production cuts.
The oil cartel, which is slated to meet on Monday, has yet to respond to Trump’s request. OPEC+ has been withholding 2.2 million barrels per day from the global market to stem falling prices. In December, the group decided to extend its production cuts through at least March 2025 before phasing them out gradually over the course of a year. OPEC+ unlikely to alter plans to gradually unwind cuts.
/Reuters, OilPrice, Goldman Sachs, CNBC, EIA/